Re Codelco

JurisdictionCayman Islands
Judge(Smellie, C.J.)
Judgment Date11 February 1999
CourtGrand Court (Cayman Islands)
Date11 February 1999
Grand Court

(Smellie, C.J.)


G.F. Ritchie for the applicant;

S.G. Hellman for the Commodity Futures Trading Commission;

S. Hall-Jones, Senior Crown Counsel, as amicus curiae.

Cases cited:

(1) Att. Gen. v. Bank of Nova Scotia, 1984–85 CILR 418, considered.

(2) B Bank PLC v. K. Ltd., 1994–95 CILR N–4, distinguished.

(3) BankAmerica Trust & Banking Corp. (Cayman) Ltd., In re, 1992–93 CILR 574, considered.

(4) Berry (Herbert) Assocs. Ltd. v. Inland Rev. Commrs., [1978] 1 W.L.R. 1437; [1978] 1 All E.R. 161, dicta of Lord Simon applied.

(5) Commodities Futures Trading Commn. v. Schindler, Grand Ct., May 15th, 1997, Cause No. 237 of 1997, unreported.

(6) Deutsch-Südamerikanische Bank A.G. v. Codelco, 1996 CILR 1.

(7) Hall, In re, 1994–95 CILR N-4; on appeal, sub nom. In re H., 1996 CILR 237, applied.

(8) Ontario Secs. Commn., In re, 1994–94 CILR 131.

(9) Norway (State of) Application (No. 2), In re, [1990] 1 A.C. 723; [1989] 1 All E.R. 745, applied.

(10) Norwich Pharmacal Co. v. Customs & Excise Commrs., [1974] A.C. 133; [1973] 2 All E.R. 943.

(11) Rio Tinto Zinc Corp. v. Westinghouse Elec. Corp., [1978] A.C. 457; [1978] 1 All E.R. 434, applied.

(12) Stutts v. Premier Benefit Capital Trust, 1992–93 CILR 605, distinguished.

(13) US v. Morton Salt Co.UNK(1950), 338 U.S. 632; 70 S. Ct. 357, considered.

Legislation construed:

Confidential Relationships (Preservation) Law (1995 Revision) (Law 16 of 1976), s.4(1): The relevant terms of this sub-section are set out at page 47, lines 3–8.

s.4(3): The relevant terms of this sub-section are set out at page 47, lines 10–15.

(6): The relevant terms of this sub-section are set out at page 47, lines 17–23.

(7): The relevant terms of this sub-section are set out at page 47, lines 24–30.

Confidential Relationships-application to court for directions-compliance with subpoena-may permit disclosure if application to enforce Commodity Futures Trading Commission subpoena pending before US court, provided application ultimately succeeds-constitutes ‘proceeding’ within meaning of Confidential Relationships (Preservation) Law (1995 Revision), s.4(1) and (7)

Confidential Relationships-confidential information-use of information-ordinarily against public policy to permit disclosure of information to government agency unable to give undertaking as to future use-exception if information already made public, no third parties prejudiced and not enforcing foreign penal law-in interests of justice to assist foreign agencies investigating crime

Confidential Relationships-application to court for directions-factors for consideration-alternative means of obtaining information, e.g. under Mutual Legal Assistance Treaty or Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978, may be used in preference to Confidential Relationships (Preservation) Law (1995 Revision) if s.4 directions would require disclosure of information in breach of undertaking to court

The applicant applied for directions under the Confidential Relationships (Preservation) Law (1995 Revision) as to whether its US attorneys should comply with a subpoena from the US Commodity Futures Trading Commission.

The applicant obtained confidential information from two Cayman banks with the sanction of the court and having given an undertaking as to its use, for the purpose of recovering the proceeds of fraud in proceedings here. It later obtained leave to use the information to pursue tracing claims in, inter alia, New York and its lawyers gave a further undertaking not to use it other than for those purposes.

The Commodity Futures Trading Commission, which was conducting an investigation into the applicant”s trading losses resulting from the fraud, with the aim of identifying the companies and individuals responsible, issued a subpoena requiring the applicant”s New York attorneys to produce the information obtained from the Cayman banks. Upon the attorneys” refusal to do so without first obtaining an undertaking from the CFTC, the CFTC

applied to the New York District Court to enforce the subpoena. The hearing of that matter was adjourned to allow the present application to be heard.

The applicant and the CFTC submitted that the court had jurisdiction under s.4(1) to hear the application, since the US attorneys intended, with the court”s consent, to give the information in evidence as required and the CFTC application to the New York court for the enforcement of the subpoena constituted a‘proceeding,’ in the sense of a preliminary matter leading to court proceedings under s.4(7).

The Attorney General (as amicus curiae) submitted that (a) the disclosure of the information was not precluded on public policy grounds, since (i) it had been produced originally in edited form by the banks, (ii) part of it was already in the public arena, (iii) there was no question of innocent third parties being affected, and (iv) the CFTC, by investigating, was not seeking to enforce penal sanctions; and (b) in the interests of judicial comity, the court should assist foreign regulatory agencies in the conduct of their activities.

Held, giving the following directions:

(1) Notwithstanding that there were other statutory means by which the CFTC could have obtained the information it sought, the court had jurisdiction to direct that it be disclosed under s.4(1) of the Confidential Relationships (Preservation) Law (1995 Revision). The notice of motion before the New York court seeking the enforcement of the subpoena would, if successful, satisfy the s.4(7) definition of ‘proceeding’ in connection with which the applicant”s attorneys were required to give evidence, namely ‘a preliminary or interlocutory matter leading to’ court proceedings. In this respect, the subpoena differed from one which did not have the sanction of a foreign court. Accordingly, provided that the New York court did order that evidence should be given, the information could be disclosed under s.4(1) (page 47, Line31 –page 48, line 18; page 48, line 39 – page 49, line 14).

(2) Since the CFTC, being itself required to co-operate and share information with other US government agencies, was unable to give an undertaking that it would not use the information other than for its own investigations and any consequent proceedings, it would ordinarily be contrary to public policy for the information to be disclosed. Other factors, including the interests of innocent third parties who might be affected by the release of the information and the potential enforcement of a foreign penal law, were also relevant to the court”s discretion under s.4(1). However, none of these concerns arose in the present case, since part of the information had already been made public and the nature of the allegations was such that the interests of third parties would not be harmed by examining the information in that context. The CFTC”s investigations did not involve enforcing foreign penal law and, furthermore, it was positively in the public interest that it should be given assistance in its functions (page 49, line 17 – page 50, line 14).

(3) However, many of the difficulties which had arisen from the application under s.4(1) could have been avoided had the parties sought assistance from the court-under the Mutual Legal Assistance Treaty, on the basis that the investigation centred on criminal fraud, or by means of...

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